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Indonesian Political Economy of Development and Lessons for Nigeria

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Indonesian Political Economy of Development and Lessons for Nigeria International Journal of Management Studies and Social Science Research INDONESIAN POLITICAL ECONOMY OF DEVELOPMENT AND LESSONS FOR NIGERIA. 1. SUSAN DOOFAN ALBERT-MAKYUR (PhD Candidate) Department of Political Science & International Relations and Diplomacy, Nile University of Nigeria, Abuja, Nigeria. 2. PROF. SADEEQUE ABUBAKAR ABBA Department of Political Science & International Relations and Diplomacy, Nile University of Nigeria, Abuja, Nigeria. IJMSSSR 2020 VOLUME 2 ISSUE 5 SEPTEMBER – OCTOBER ISSN: 2582 - 0265 Abstract: The growth of any country is measured by the vibrant nature of its political economy. Indonesia is known to be among the largest and fastest growing economy in the world, both in economics, natural resources, geography, and demography. Indonesia has lived in different scenarios since its independence in 1949. From an authoritarian regime to its present state of free market and democratic system. Based on these variables, this paper examines, in brief, the most significant stages of the country’s post-colonial development, taking into cognisance the major events that transformed the economy of Indonesia, to comprehending the strength and weaknesses that led to its growth. Using the Economic Nationalism theory that, a country protects its own economy by reducing the number of imports and investments from other countries, the paper reveals that Indonesia have used her political and economic resources/initiatives to achieve development. Through secondary data such as journals, books and the internet, the paper will analyse Indonesia’s post-colonial challenges, such as the Asian financial crisis, and the Covid-19 pandemic. It will conclude on how Indonesia managed its political and economic crisis to attain tremendous growth and recommend that Nigeria should use her political and natural economic resources to modernize and pull her citizens out of poverty and reposition as a political and economical giant within Africa and the globe. Keywords: Political Economy, Indonesia, Economic Nationalism, Asian Financial Crisis, Covid-19 pandemic, Development, Nigeria. 1. INTRODUCTION Indonesia archipelago is a group of islands nation in Southeast Asia and Oceania, it lies between the Indian and Pacific oceans. Indonesia consists of more than seventeen thousand islands. Indonesia is the world's largest island country and the 14th largest country by land area, at 1,904,569 square km (www.nhtransit.com). It is the world's 4th most populous country with over 267 million people, as well as the most populous Muslim-majority nation. The world's most populous island Indonesia is Java, known as home to more than half of Indonesia’s population. Indonesia was annexed by India and colonized by the Chinese dynasties before falling into the trap of the Europeans (Netherlands), which led to a very solid economic foundation while that of China/India led to strong values, culture, and industrialization. Since the independence of Indonesia in 1949 from the Netherlands and its freedom from the Japanese occupation, the country’s economy was left in an extremely worse condition and its national income was far below the global level in the 1940s. Although compared to the third world countries, the economy fared better in the early years of independence, this was because of the colonial economic structure left behind by the Dutch and not because of modernization. Marked by severe political instability, the country experienced about 17 cabinets from 1945 to 1958 which were led mainly by the non-communist party that was seeking for support with its adopted populist policies to strengthen the PKI (Communist Party of Indonesia) instead of enhancing an economic development that was based on indigenous wealth. Rossoti (2019) in Rosser (2007). By 1956, the leadership of Sukarno began the proclamation of the “Guided Democracy”, an Indonesian system of government that significantly represented the interest of the social groups like the Islamic, army and communists’ groups. Despite the unanimous method that the “Guided democracy” adopted in ruling the people of Indonesia, the country shift from the center left programmes to radical policies. Important among them was the new laws for agrarian and the American/ British assets nationalization. Although different reasons were given for Indonesia’s www.ijmsssr.org Copyright © 2020 IJMSSSR All rights reserved 22 International Journal of Management Studies and Social Science Research radical economic policies, there was this great desire to naturally eliminate liberalism in the economy since they had suffered a huge loss during the colonial era. Similarly, these changes also caused an average GDP growth in the 1960s which did not measure up to the population. According to the World Bank, the lower personal income was about 1000% in 1965 and together with the high inflation, it had a tremendous impact on the overall status of the economy. In 1967, the army took over in a coup because the citizens became unhappy with the economic performance of the nation and its increased communists’ prominence. Thus, by 1968, Suharto was made the president. His tenure (New Order) lasted for over three decades with a practical economy and financial stability and reforms that were focused on attracting foreign investments across the world. So, a group of US technocrats made this feasible through the appointment of the “Berkley Mafia”. This Berkley Mafia was a Socio-economic and policy think-tank of the Suharto government that superintended all strategic policy and programmes in Indonesia under the new order. However, one of the factors that led to this great development was the economic policies of the New Order. This was followed by oil price shock after 1973. Thus, Indonesia moved from a predominantly agrarian economy to hydrocarbon exporters. The shift was influenced by foreign geopolitical events, especially the Viet Nam war. The US was afraid of an expansion of communism in South East Asian if Hanoi emerges as a victor in the Indochina war; hence, using large quantities of development aids, the US supported the anti-communist regime by giving Indonesia top aid during the 1970 war. Additionally, the economic growth in the country continued up until the 1980s, only during the fall in oil prices that it slowed down. The reforms from the world recession of the 80s made possible this remarkable stability. Suharno's team of economists called for the Rupiah to be devalued, and there were fuel subsidies and a cut in food prices. The team also pushed for tax reform and the liberalization of the financial system. After the second fall of the oil prices, similar reform policies were also undertaken to cushion the effect of the recession. Furthermore, the proximity to other Asian Tigers and to Japan was a great advantage. It is known that Indonesia reacted productively to the crisis in the 1980s thereby maintaining growth rates than was above the world average and at the same time control the inflation. Also, in 1993, the World Bank listed Indonesia among the “Asian Tigers”, a group of 8 high-performing Asian economies (Hong Kong, Indonesia, Thailand, Japan, Singapore, Malaysia, Taiwan and the Republic of Korea) due to its remarkable achievements during the first two decades of the New Order. These Asian Tigers stabilized their economies with proactive developmental policies that led to quick growth in the region. They had open policies that enhanced capital accumulation by making banks more reliable and by encouraging high levels of domestic savings. Rossoti (2019). Skilled labor was increased through universal education across the country. Another round of huge growth for Indonesia was during the half of the 20th century when Iraq invaded Kuwait and oil prices increased globally. Since the country had good policies in place, it started attracting huge amounts of foreign capital. According to the World Bank, direct foreign investment jumped from 1.03% of GDP in 1990 to 2.74% in 1996. Thus, Indonesia saw itself soaring as a non-oil exporter and better integrated with the global market. In summary, Indonesia enjoyed a robust transformation during the decades of the new order in many regards. Similarly, the World Bank noted that the population that lived with less than $1.90 per day was 70.3% in 1996. The condition continued to improve and between 1970 to 1996, Indonesia outperformed in growth in every region of the world. Although, serious socio-economic and natural disasters such as corruption, social-political upraises, and agitation for more social justice, infrastructure deficit, volcanoes, elitist overbalance, poor banking systems, lack of nationalistic feelings among the citizens were all present. Despite these, Indonesia was able to remain afloat to withstand the dangerous turn of the Asian Financial crisis. Today, the outbreak of the Covid-19 Pandemic has hit the world hard, further exacerbating the political economy and awaken nations self-induced and auto mode. Again, Indonesia has tackled this crisis effectively and it’s presently revamping her economy. Using the Economic Nationalism theory that, a country protects its own economy by reducing the number of imports and investments from other countries, the paper reveals that Indonesia have used her political and economic resources/initiatives to achieve development. Through secondary data such as journals, books and the internet, the paper will analyse Indonesia’s post-colonial challenges, such as the Asian financial crisis, and the Covid-19 pandemic. It will conclude
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